If you check the prices of your stocks every day, my Buy and Hold Portfolio is not for you. It was designed for my Internet Wealth Builder newsletter in June 2012 for patient, long-term investors who don’t want the stress of day-to-day monitoring.
The portfolio has one basic goal – invest in great stocks and then hold on to them, no matter what the market is doing. Over the long term, the strategy works. There are ups and downs, of course, but the underlying thesis is that the long-term trend of the markets is up. If you own good stocks, they’ll move with it.
This portfolio consists mainly of Canadian and U.S. blue-chip stocks that offer long-term growth potential. It also has a bond ETF holding. The original weighting was 10 per cent for each stock with the bond ETF starting with a 20 per cent position. That has now been reduced because equity increases have outpaced the bond market.
I used several criteria to choose the stocks. These included a superior long-term growth profile, industry leadership, a good balance sheet, and relative strength in down markets.
The objective is to generate decent cash flow (all the stocks but one pay dividends), minimize downside potential, and provide slow but steady growth. The target rate of return was originally set at 8 per cent annually.
These are the securities we hold with comments on how they performed since my last review in June. Prices are as of the close of trading on Dec. 2.
iShares Canadian Universe Bond Index ETF (TSX: XBB). Bonds continue to struggle in the current environment as inflation is putting pressure on central banks to raise rates. This pattern is likely to continue through 2022, however I still view bonds or their proxies as an essential part of a long-term portfolio. The price is down $0.41 since the last review in June but that was almost offset by distributions totalling $0.399 per unit.
BCE Inc. (TSX, NYSE: BCE). BCE shares continue to strengthen, rising $4.85 since the last update. Because of timing we received only one dividend of $0.875 per share.
Brookfield Asset Management (TSX: BAM.A, NYSE: BAM). Our largest holding continued its strong performance with a gain of $9.55 in the latest period. We also received two dividends for a total of $0.323 a share.
CN Rail (TSX: CNR, NYSE: CNI). CN stock recovered big time after the company lost out to rival Canadian Pacific in the battle to take over Kansas City Southern. The shares are up an impressive $34.66 since the last review. Because of timing we received one dividend payment of $0.615.
Enbride (TSX, NYSE: ENB). Enbridge stock continues to struggle amid concerns a state court in Michigan may grant the Governor’s petition to stop the passage of oil through the company’s Line 5, that runs beneath the Straits of Mackinac. The shares are down $1.53 since the last review. Fortunately, that was offset by two dividend payments for a total of $1.67 per share.
Toronto Dominion Bank (TSX, NYSE: TD). Banks continue to rally, and the Office of the Superintendent of Financial Institutions has lifted its ban on dividend increases. TD announced last week it is raising its dividend by 13 per cent. The stock is up $9.33 since the last review. We received two dividend payments at the old rate of $0.79 per quarter for a total of $1.58 per share.
Alphabet (NDQ: GOOGL). This stock continues to be a money machine for us. The shares are up US$409.32 since the last review in June. This is the only stock in the group that does not pay a dividend.
UnitedHealth Group (NYSE: UNH). This is the top health insurer in the U.S. and the shares continue to move higher. They gained US$47.21 since our last review. We received one dividend due to timing, for US$1.45 per share.
Walmart (NYSE: WMT). Walmart didn’t do much of anything during the period. The shares dropped US$1.44. We received one quarterly dividend of US$0.55 per share.
Cash. At the time of the last review, we had cash and retained earnings totaling $4,209.05. We held the money in a Motive Savvy Savings Account, which was paying 1.25 per cent. We earned interest of $21.92.
Here is the status of the portfolio as of Dec. 2. For consistency, the Canadian and US dollars are shown at par. Trading commissions are not factored in, although in a buy and hold portfolio they are not significant in any event.
IWB Buy and Hold Portfolio (a/o Dec. 2/21)
|Symbol||Weight %||Shares||Average Price||Book Value||Current Price||Market Value||Retained Earnings||Gain/Loss %|
The new portfolio value (market price plus retained dividends/distributions) is $161,269.71. That compares to $145,865.05 at the time of the last review, for a gain of 10.6 per cent.
The big winners during the latest period were Alphabet, UnitedHealth, Brookfield Asset Management, CNR, and TD Bank. The only stocks to post (small) losses were Walmart and Enbridge.
Since inception, we have a total return of 222.9 per cent. That represents an average annual compound growth rate over 9-1/2 years of 13.13 per cent, which is well ahead of our 8 per cent target.
This is a Buy and Hold portfolio, so I am not making any changes to our holdings. The overall asset mix is sound.
However, we are holding a lot of cash so let’s put some of it to work, as follows.
XBB – We will buy 10 units at $31.50 for a total of $315. That will give us 510 units and reduce retained income to $10.59.
BCE – We’ll buy five more shares at $65.54 for a total of $327.70. That will give us 185 shares. The retained earnings will drop to $158.69.
BAM.A – We’ll add another five shares at $73.21 for a total of $366.05. That will give us 365 shares. The retained earnings will drop to $264.19.
ENB – We’ll take advantage of the pull-back to add five shares at $47.87, for a total cost of $239.35. That will leave $81.05 in retained earnings.
TD – The bank is raising its dividend so let’s add to our cash flow by purchasing another five shares at $96.50, for a cost of $482.50. We now own 175 shares and have retained earnings of $323.30.
We have cash and retained earnings of $3,438.40. We will move this money to the EQ Savings Plus Account, which currently pays 1.25 per cent.
Here is the revised portfolio. I will update it again in June.
IWB Buy and Hold Portfolio (revised Dec. 2/21)
|Symbol||Weight %||Shares||Average Price||Book Value||Current Price||Market Value||Retained Earnings|